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Private health at risk if Bupa quits
Niall Brady



PRIVATE health care operators, which will plough over 1bn into new facilities over the coming years, face a very uncertain future if Bupa is forced out of the health insurance market, according to the man who pioneered private investment in the sector.

Jimmy Sheehan, founder of the Blackrock Clinic in Dublin and the Galway Clinic, said private money could not be expected to bail out the crisis-hit hospital system if VHI's monopoly in health insurance is restored.

His comments follow High Court approval for the government's controversial policy of risk equalisation, which Bupa claims would plunge it into losses by forcing it to hand 161m over to VHI in the next three years.

Bupa has threatened to quit the country if the plan is implemented in its current form, a move that would restore the monopoly enjoyed by until 1997.

The state-owned insurer opposes extra private beds in the hospital system, claiming that more capacity would mean more claims from subscribers.

"How is it feasible to encourage more private hospitals if there is no support from the main insurer?" said Sheehan.

"Private investment would be extremely disadvantaged if competition is driven out and there is a return to monopoly. People automatically assume that private hospitals are a gold mine but they need a big dose of reality in the current environment."

Sheehan has fought many battles with VHI over the price it is willing to pay for medical procedures performed at his clinics.

"We suffered for many years in Blackrock and the agreement we have with VHI in Galway is still not satisfactory, " he said. "We've cut costs to the absolute minimum . . . they're as low as we can possibly go . . . and we're still losing a lot on VHI procedures. All we want is a fair deal. You can't expect us to do work at a loss for any insurer."

If Bupa exits Ireland, health minister Mary Harney could see her plans for more private investment in health care go up in smoke, Sheehan predicted.

"It's crunch time because, if Bupa pulls out, there'll be 450,000 very unhappy subscribers left behind and that's going to have political repercussions, " he said.

"Harney says she's in favour of competition so why is one of the main competitors being driven out or forced to operate at a loss?"

Nevertheless, there seems to be no shortage of moneychasing investment opportunities among the ten private hospitals that Harney plans to co-locate beside overcrowded public facilities. Much of the interest comes from wealthy people who will get generous tax breaks in return for their investment.

"There is a lot of interest in the co-location model and some high-quality people playing in the sector, " said Cormac O'Rourke, director of structured finance at Goodbody Stockbrokers' corporate finance team. He believes that, even if Bupa leaves, health insurance is still attractive enough to pull in other competitors.

An even bigger threat to co-location would be a change of government at the next election because Fine Gael and the Labour Party oppose the plan. But investors are hoping that the reality of hospitals bursting at the seams would force a rethink.

"Despite the opposition of Fine Gael and Labour, I'm not entirely convinced that they won't have to return to it [co-location], " said O'Rourke. "There's no equivalent public-sector model that would secure the additional capacity in the same time-frame."

According to a top banker who has backed several private hospitals, patience is important in any publicprivate partnership.

"When all the political dots are joined up, things ultimately get done, " he said.

"There's so much momentum in the pipeline that it would be politically foolish to derail the project [co-location] so far down the tracks, no matter who wins the election."




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